Net 30 Terms: Not the Best or Fastest Way to Close an IT or Software Project
Posted by David Rhoads on Fri, Oct 21, 2011 @ 04:44 PM
Although software has reshaped many traditional business practices, organizations continue to use the same, tired net-30 terms to finance their IT and software projects. Yet this approach forces your clients to pay in full for solutions that can take up to a year—or more—to deliver a return on investment. And this, in turn, can delay some customers’ purchasing plans.
But not anymore.
To get paid faster—while allowing customers to stretch-out payments over longer time frames if desired—a growing number of solution providers are working with specialized finance firms, such as Blue Street Capital to replace net 30 terms with financing that’s more appropriate to today’s software and IT projects, and more amenable to today’s channel.
After all, net-30 terms have been around for decades. And although the technology industry has reshaped and enhanced many business processes, many organizations continue to finance their computing purchases in the same manner older companies financed typewriters. This doesn’t make sense for either the customer or the solution provider.
Customers, after all, are paying in full for a solution that may not deliver a complete return on investment for months, or potentially, years after implementation. Think of complex customer relationship management or enterprise resource planning solutions: Payback is expected to be generous but not overnight. Yet customers typically must pay upon installation or final training sessions.
Solution providers often see their promised net-30 payments pushed back beyond the original terms. Sometimes 30 days becomes 45, 60, or even 90 days, as companies hold onto their cash for as long as possible without penalty. In some cases, VARs have already paid vendors for their clients’ components and devices, leaving them out-of-pocket and awaiting replenishment of funds.
By raising the prospect of long-term funding early in the sales process, solution providers give clients more financing options. Since clients’ funding extends far beyond a month, they should be able to repay the loan from the savings generated by the new solution. In other words, the implementation actually can pay for itself with its own dollars because the payment schedule is stretched long past Day One of usage.
Of course, solution providers’ cash is no longer tied-up at one or two customer locations, giving you more freedom to pursue new clients and opportunities.
And that adds up to a great deal for everyone.
To learn more download The Technology Resellers Guide to Financing Options.